A Look Into Bitcoin and Its Performance Around US Presidential Elections

The first time Bitcoin witnessed a US election was when it was only three years old. The cryptocurrency was about to celebrate its second anniversary as a tradable financial asset on now-defunct Mt. Gox exchange – even as half of the world assumed it was a scam, a Ponzi scheme, a terrorist financing/money laundering tool, and whatnot.

It was also the time of endless optimistic narratives. Some called Bitcoin a game-changer in the way global payments network operate: an utterly decentralized protocol that does a bank’s job for 99 percent less money.

Meanwhile, others had already started projecting it as the ultimate answer to the US dollar hegemony and the overratedness of gold as a hedging asset.

But even then, Bitcoin showed no correlation to the global stock market or events that impacted it. That also included a US presidential election, an event that is notorious for moving markets rigorously.

The one most significant takeaway from every Bitcoin performance around an election season is that it rose relentlessly after the event.

Bitcoin has matured into a global asset. Its value now takes cues from everything from coronavirus pandemic to the stock market crash and from a rising US dollar to the central banks’ unprecedented monetary policies.

Therefore, it is essential to revisit the last two presidential elections to know about its Bitcoin’s responsiveness to those events.

2012 and 2016: Big Rally, Small Correction, and Repeat

2012 was an iconic year for Bitcoin. The period saw nine months wherein the cryptocurrency closed at a significant profit. Meanwhile, there were just three months with negative results. One of them was a month before the 2012 US Presidental Election.

As Barack Obama battled Mitt Romeny for the oval office on November 6, Bitcoin experienced a modest downside move ahead of the event. In October 2012, the cryptocurrency shed about 9.98 percent of its spot rate. Before that, it had trended upward in the year by as much as 176.42 percent (data from BitStamp).

Bitcoin during the 2012 Presidential Election. Source: TradingView.com

The rally eventually took the Bitcoin price to a new all-time high of $1,100 more than a year later. But the cryptocurrency crashed later to as low as $152, with researchers finding that Mt. Gox CEO Mark Kerpeles was behind the pump-and-dump.

As usual, the 2012 presidential election was a non-event for Bitcoin, which was then struggling with issues related to price manipulation.

A similar price action took place in 2016 as Bitcoin dropped nearly 12% five days before the US election between Donald Trump and Hilary Clinton on November 8. It then rebounded towards new higher highs.

Bitcoin during the 2016 Presidential Election. Source: TradingView.com

Again, the factor that largely contributed to Bitcoin’s rise after the election was China’s capital control. It prompted the Chinese citizens to use Bitcoin as a tunnel to move money abroad, raising its demand against a limited and continuously decreasing supply.

The rally fumbled after China decided to ban Bitcoin trading in January 2017.

2020: Bitcoin Comes of Age

As stated, 2020 has been a game-changer for Bitcoin as far as it concerns global adoption.

The coronavirus pandemic and its subsequent impact on the international economy raised awareness about Bitcoin as a digital hedging asset. The cryptocurrency fell almost in sync with traditional markets and against the US dollar’s uptrend in March 2020. That was the first significant sign of its correlation with the mainstream assets.

Later, Bitcoin recovered in tandem with Gold and US stocks as the Federal Reserve introduced new measures to tackle the coronavirus-induced lockdown. The US central bank committed to purchasing government and corporate debts endlessly. At the same time, it slashed its key lending rates to near-zero.

More support came from the Trump-led US government. They introduced a $2 trillion relief package to aid American households and businesses. In total, the fiscal deficit ballooned by almost $3 trillion in the earlier months, thereby reducing the purchasing power of the US dollar.

Bitcoin rose by 250% against the US stimulus narrative. Source: CoinStats

Between March and October 2020, the Bitcoin price rallied by almost 250 percent as more and more firms decided to use it as their hedging alternatives to the US dollar. Public-traded software firm MicroStrategy, for instance, converted $425 million of its cash reserves to Bitcoin. Payment firm Square also showed a $50 million BTC in their balance sheet.

The Second Stimulus

With coronavirus cases seeing a resurgence in the US, creating further distress for the American individuals and businesses, the US government has committed to releasing the second relief package.

Economists believe that the US Congress would finalize the aid after a clear win for Donald Trump or his contender Joe Biden. And once it’s out, the fiscal deficit will grow further, and the Fed would relentlessly continue its unlimited bond-purchasing and near-zero interest rate policies.

That means more downside pressure on the US dollar – and more upside moves in the Bitcoin market.

The cryptocurrency is a clear winner in the US presidential election 2020.

Since you’re here, feel free to check out the CoinStats cryptocurrency portfolio management app to track and manage your Bitcoin and altcoin investments.

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The Pros and Cons of PayPal-Bitcoin Combo

Last week, the long-running competitor of the Bitcoin payment network turned into one of its largest integrators. Ladies and gentlemen of the crypto-verse, please welcome PayPal, a $240-billion global payments giant.

With a history of firing nasty comments at Bitcoin, the Wall Street mammoth, ranging anywhere from “bubble” to “financial scam,” appeared with candies in its hands this time. In an announcement Wednesday, PayPal said that it would soon offer its US-based customers the ability to store, purchase, sell, and even spend Bitcoin and a few other altcoins. 

In short, GOOD NEWS for an industry that was itching to gain global exposure.

Perhaps, that is among the only remaining pros of a PayPal-Bitcoin combo: adoption. PayPal currently has 286 million active users. It’s practically the 21st largest bank in the world, albeit not being a banking service. For Bitcoin enthusiasts, PayPal is a perfect shortcut to global adoption.

Traders have already assessed the event as a cheerful one. Soon after PayPal announced its foray into the cryptocurrency industry, Bitcoin popped up by almost 15 percent, disregarding technical resistances to log its 18-month high near the $13,360-level (data from Coinbase).

Bitcoin rises above $13K after the PayPal announcement. Source: CoinStats

The idea is simple: PayPal brings more exposure; People buy more Bitcoin. The demand goes up while the supply stays systematically low. Therefore, the price shoots upward.

But there is a catch!

PayPal is A Step Back

The most attractive feature of Bitcoin upon its launch was its ability to sideline expensive and heavily-centralized financial companies and replace them with a cheaper, peer-to-peer alternative.

What PayPal does by integrating Bitcoin into its existing services is: Bury the very feature that it competed with all these years. The firm brings Bitcoin into its walled-garden and subjects the cryptocurrency would all the scrutinies that it has tried to avoid in its 11-year lifetime.

Take money transfers, for instance. Many of us folks switched to Bitcoin because it could process a money transmission within minutes at a 99 percent cheaper rate than any banking and payments service. Besides, the recipients sold those Bitcoin for local fiat at an exchange rate they preferred without paying a humongous fee for it.

Under PayPal, that feature is likely to go missing. First, users won’t transfer their BTC to digital wallets that are not PayPal’s. Second, converting them to fiat should bore an excessive fee of 2.3 percent – that is what PayPal charges its customers anyway. And third, the firm can always censor payments, a move that punches Bitcoin’s very core philosophy of anti-censorship right into its guts.

Bitcoin Stockpiling

The very idea behind Bitcoin’s launch was to create an alternative financial system, wherein people replace the always-devaluating fiat currencies with scarcer ones. Its beauty lay in people’s ability to own a part of the financial system by “HODLING” its tokens.

But what PayPal’s model would likely do is take the ownership of that Bitcoin away. A user who would like to spend BTC would be depositing it into the reserves of PayPal. A merchant who would receive the funds would also need to sell their BTC to PayPal or its partners for fiat.

That would effectively take more BTC out of the current supply. They will instead land in the custody of big firms. The stockpiling will give them more access to the BTC market sentiment. Their access to more BTC units would have them vote unanimously on Bitcoin’s future developments as a blockchain project.

So far, the best thing about BTC is that an average Joe can access it as much as a Wall Street firm can. But with big firms buying or getting to access a massive amount of Bitcoin, the supply deficiency would force small investors to speculate on the cryptocurrency’s derivatives, instead, mainly options.

Bitcoin won’t remain Bitcoin, should that happen.

Since you’re here, feel free to check out the CoinStats cryptocurrency portfolio management app to track and manage your Bitcoin and altcoin investments.

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Bitcoin Begins Q4 With a Bang: Is $20K By Year’s End Possible?

A battered final month of the third quarter signaled more pain for Bitcoin, a decentralized cryptocurrency known for hedging global market risks and enabling cheaper and quicker cross-border payments.

Its rate against the US dollar closed September more than 7 percent lower. The reasons were out in open; Bitcoin was relying on the liquidity injections committed by global central banks as they aimed at filling the pockets of the unemployed and the owners of stilled small businesses.

Unfortunately, the stimulus failed to materialize because of disagreements between the two sections of American politics. The Democrats asked for a $2.3 trillion package while their opponents, the Republicans, stuck to $1.6 trillion.

The last days of the third quarter saw seesaw remarks from both the Democrats and Republicans’ representatives. Meanwhile, Bitcoin traders decided to buy the cryptocurrency when the dialogue raised hopes for the second stimulus. They sold the positions later over hints of no negotiations.

Entering the fourth and the final quarter of 2020, Bitcoin traders received some concrete but disappointing remarks on the aid. This time, President Donald Trump himself stepped forward to cancel the negotiations at least until the US election.

Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19. We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their…

— Donald J. Trump (@realDonaldTrump) October 6, 2020

On the same day, Bitcoin fell by $400 within a few hours.

The Bitcoin Mind Games

Things were looking bad for the cryptocurrency until Mr. Trump reappeared with a tweet wherein he said that he was willing to pass individual coronavirus aids for the airline sector, the unemployed, and the suffering businesses.

The House & Senate should IMMEDIATELY Approve 25 Billion Dollars for Airline Payroll Support, & 135 Billion Dollars for Paycheck Protection Program for Small Business. Both of these will be fully paid for with unused funds from the Cares Act. Have this money. I will sign now!

— Donald J. Trump (@realDonaldTrump) October 7, 2020

Bitcoin rebounded by 3.95 percent after the president’s softening stance.

Bitcoin is maintaining support above $10,000. Image Source: CoinStats

But was it just the hopes of the second stimulus package that boosted the cryptocurrency? Not likely. So it appears, Bitcoin ascended also as Square, a multinational payments company, announced that it has bought $50 million worth of BTC units.

Now let’s walk through the trading psychology. A $50 million investment in Bitcoin is peanuts. But when it comes from a global firm such as Square, that the Twitter CEO Jack Dorsey heads, it creates a ripple effect – a buying frenzy among traders that see the investment as a validation for Bitcoin’s long-term potential as a financial asset.

#bitcoin basis moved a couple of % up on the square news pic.twitter.com/PeJ3HTv8LP

— skew (@skewdotcom) October 9, 2020

That is despite the endless bulldozing Bitcoin receives from the likes of Warren Buffet, Peter Schiff, and Nouriel Roubini (Google them, please). Traders and investors have stopped caring about the big men and their opinions on new technologies.

And with the involvement of companies like Square – as well as public-traded firm MicroStrategy and hedge fund veteran Paul Tudor Jones – in the Bitcoin space, the pot stirs for the rest of the financial community.

Here is Eric Dadoun, an early-stage startup investor, telling it better as he responds to Mr. Schiff (sorry, but you’ll need to Google “pomp” as well).

Schiff & Pomp really are made for each other.

No, the Square news isnt significant because of price action. Its significant because its further validation of the narrative and creates further safety for other companies & HNWI to either buy-in or to announce existing positions. https://t.co/SIGq5g2nJX

— Eric Dadoun (@EDadoun) October 9, 2020

Bitcoin recorded a spike after the Square news. But yes, it did not take away the possibility of its falling all over again. If the cryptocurrency had to sustain its uptrend, it would have done so after MicroStrategy’s $425 investment. There wouldn’t have been any big corrections in the first place.

It brings us back to the macro fundamentals: the US stimulus deal.

To Aid or Not to Aid

Bitcoin rose by more than 200 percent throughout the second and halfway through the third quarter – a surge that appeared as the US Congress passed a $2 trillion stimulus relief to walk Americans out of the coronavirus-led recession.

Meanwhile, Bitcoin also jumped because of the Federal Reserve’s unprecedented monetary policies, especially the ones that concern the unlimited purchasing of government bonds and mortgage-backed securities, and ultralow interest rates.

Investors found Bitcoin attractive for two reasons: the cryptocurrency appeared scarcer than the US dollar and was an incredible asset for its decade-long history of delivering more gains than pains.

Even today, that is the very reason why companies buy Bitcoin. They expect their dollar reserves to lose value in the future. Bitcoin is their insurance should that happen.

And the reality is: there is no second stimulus so far into Q4. But the answer to “will there be one” is also the response to whether or not Bitcoin would hit $20,000 by the end of 2020.

Economists expect investors to wait until the US elections. Once the politics become stable, the stimulus bill would follow. It could be this year or the next. But until that happens, Bitcoin should just hold above $10,000 to ensure it could hit $20,000 on the next dollar injection.

All and all, it is better to hold and sleep on it – at least for this year.

Since you’re here, feel free to check out the CoinStats cryptocurrency portfolio management app to track and manage your Bitcoin and altcoin investments.

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Hopes for Bitcoin Rally as Americans Prepare for Second Coronavirus Stimulus

Steven Mnuchin was one of the biggest catalysts behind the Bitcoin rebound last week.

The US Treasury Secretary, known for having an ill-opinion about the cryptocurrency, sat alongside his knee-shaking buddy, the Federal Reserve Chairman Jerome Powell, before the Senate Banking Committee on Thursday. He testified about the coronavirus’s impact on the US economy and how his office is planning to handle the situation by vouching for more stimulus.

That Long-Delayed Aid

Stimulus, as all of our readers know already, is an aid–a financial help–offered by the government or the central bank to people who need it the most. The coronavirus pandemic has pushed many small and medium scale firms out of business. As a result, the joblessness in the US is now lurking at record levels. People have rents to pay, but they don’t have access to money.

The US government in late March had stepped in with a $2 trillion relief. The package helped American adults with $1,200 checks. It further gave families an additional $500 per child under 17.

But the aid is running out of steam. The unemployment rate is near-steady, which means that the US economy is not adding or recovering any jobs. On the other hand, the coronavirus pandemic is threatening to rise again as the winter season kicks in. It would mean more lockdowns, more business failures, and more unemployed Americans.

Mr. Mnuchin realizes that one hundred percent. The White House official committed to resuming negotiations with the US Congress to release the second coronavirus stimulus on Thursday.

His statement injected the Bitcoin market with enthusiasm. The cryptocurrency rose more than 4 percent on that day, breaking away from losing momentum at the beginning of the same week. BTC/USD kept rising through the weekend thanks to another accidental bull called Nancy Pelosi.

The House Speaker told CNN that she is hoping for a deal as the Democrats and Republicans sit for a one-to-one on Friday. She said:

 “I’d rather have a deal to put money in people’s pockets than to have a rhetorical argument.”

Democrats have reportedly prepared a new proposal that demands $2.4 trillion in aid for Americans. The new bill would return improved unemployment benefits, direct payments to qualified Americans, the Paycheck Protection Program for small-business loan funding, and airline aid. It could be ready for a vote by Oct. 2.

Pelosi’s statements came on Sunday. Bitcoin added another 3.41 percent following the event.

The Bitcoin Outlook Now

Bitcoin bulls love anything that is or rhymes with the word ‘stimulus.’ Their narrative is pretty simple: House passes the aid, more dollars enter the US economy, the US dollar index falls, investors run for cover in riskier assets, and Bitcoin rises.

It has happened before in March. Bitcoin was able to come out of a deadly bear-led crash only after the Federal Reserve announced an infinite bond-buying program and slashed its interest rates to near zero.

Read more: Bitcoin, Wall Street, And The End Of Their Social Distancing

The US Congress further fueled the Bitcoin price rally after announcing a $2 trillion stimulus package. That all happened as the US dollar lost its value and fell to a 27-month low just at the start of this September.

Bitcoin, at the same time, surged by more than 200 percent.

Bitcoin is looking to close towards $11,500 this week. Source: CoinStats

Just recently, the Fed committed to keeping interest rates near zero until 2023. The US central bank also said that it would raise inflation above its 2 percent target. That further made investors bullish about Bitcoin for the long-term.

How is it possible that #Bitcoin price will never be above $20,000 again?

I mean something crazy has to happen to $BTC stays under its previous ATH forever.

Ask yourself.

— Narek Gevorgyan (@narek_gevorgyan) September 27, 2020

CoinStats founder has gone totally bullish on Bitcoin.

The only missing key, in the currentt scenario, was a stimulus package. Americans have already absorbed the last aid. They want more. And the US government has to give its citizens what they want especially if they don’t want to see their anger in the next presidential election in November.

Read further: No $20,000 Bitcoin Until Us Presidential Election 2020

With Mnuchin and Pelosi committing to restart negotiations, people can expect Bitcoin to stay steady or bullish for this week. The cryptocurrency might close above $11,000 after all. But its next price action course entirely depends on whether or not the US Congress passes the stimulus bill.

If they don’t, expect Bitcoin to fall back towards $10,000.

Since you’re here, feel free to check out the CoinStats cryptocurrency portfolio management app to track and manage your Bitcoin and altcoin investments.

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No $20,000 Bitcoin Until US Presidential Election 2020

For months, the Bitcoin price rose this year – regardless of a fast-spreading pandemic, the resulting economic turmoil, and poor evaluations by the mainstream media houses. Then, in September, the cryptocurrency came crashing down.

It was March 2020 all over again, minus severity. Bitcoin established a year-to-date high near $12,500, started correcting lower on profit-securing sentiment, but accelerated its bearish momentum alongside a similar correction in the stock and gold markets.

Bitcoin is maintaining support above $10,400. Image Source: CoinStats

The narrative goes like this: equities fall hard; the loss-making traders start selling their gold and bitcoin investments at their local tops to cover losses; the US dollar rises, and repeat.

One also has to remember that traders dumped their Bitcoin positions against a very bullish macro outlook. The Federal Reserve committed to keeping interest rates near zero up until 2023. Their chairman Jerome Powell vowed to push inflation higher above the normal 2 percent target. And the US Congress hoped to inject more dollar liquidity into the economy through a second stimulus package.

Read also: Bitcoin Investors Should Prepare For A Stormy Second Half Of 2020

But Bitcoin fell, nevertheless, because one of the main catalysts did not play out as planned: the stimulus.

A Political Circus

This month’s market turbulence came amid growing concerns about the US Congress’s failure to pass a new coronavirus stimulus package. Earlier this month, the Republican side attempted to pass a smaller bill. But as the relief did not include a $1,200 check, the Democrats rejected the proposal entirely.

Still, the Democrats pushed back on the stimulus checks during a hearing with the Fed chairman Jerome Powell and Treasury Secretary Steven Mnuchin this Tuesday.

Mr. Powell clarified to the committee that the Congress will have to intervene with the second stimulus package if they don’t want to stall the ongoing US economic recovery. He noted that the Fed cannot assume the responsibility of distributing checks to Americans all by itself.

“The risk is that over time [the unemployed] go through those savings . . . their spending will decline, their ability to stay in their homes will decline, so the economy will begin to feel those negative effects at some time,” he told the Democrats. “I think that it is likely that more fiscal support will be needed.”

But with the ongoing standoff, observers believe it is now very unlikely for Congress to pass the stimulus deal. The chances have diminished also by political tensions ahead of the US presidential election on November 3, 2020.

Both Democrats and Republicans will attempt to score political mileage over each other to score votes out of frustrated Americans. That said, one can expect no stimulus bill until the US votes for its next president: Donald Trump or Joe Biden.

The US Dollar and Bitcoin

The absence of a stimulus package is trimming gains all across the financial market, including that of Bitcoin. But what is benefiting out of the political uncertainty is the US dollar.

The greenback jumped to its eight-week high as investors treated it as their safest haven asset. The lack of a stimulus bill ensures that there would be less dollar liquidity in the market. Therefore, investors may have decided to lock their profits in the cash until further clarity.

Bitcoin has shown a strong inverse correlation with the US dollar since March 2020. The cryptocurrency could therefore continue plunging as the greenback rises against the stimulus backdrop.

– S&P500 is signaling a short term bearish reversal continuing the Macro bearish reversal

– NASDAQ may lead the market down, FinTech stocks are over-leveraged

– U.S. Dollar Index now breaking out into new local highs

– GOLD testing support

– #Bitcoin bearish setup

— Kevin Svenson (@KevinSvenson_) September 23, 2020

That ensures that BTC/USD is not hitting $20,000 – let alone its 2019 high of $14,000 – until the US presidential election. At best, it could hold support above $9,000 while anticipating a jump after the political battle is over.

Let’s hold the bullish bets for the Q1/2021.

Since you’re here, feel free to check out the CoinStats cryptocurrency portfolio management app to track and manage your Bitcoin and altcoin investments.

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Bitcoin Stands Tall Ahead of FOMC Meeting This Week

On Sunday, Bitcoin experienced a brief pump-and-dump.

The BTC/USD exchange rate was able to break above $10,400, a resistance that capped the pair’s upside outlook for almost two weeks. Bitcoin eventually formed a session top above $10,500 only to find later that the area was full of profit-taking traders.

A pullback ensued and the cryptocurrency fell back below $10,400, reclaiming the level as its resistance all over again.

The seesaw price action came just ahead of the Federal Open Market Committee’s September meeting this week. On Tuesday and Wednesday, the committee expects to shed more light on how its recent decisions affect its monetary outlook in the near-term.

Two weeks back, the Federal Reserve Chairman Jerome Powell announced a new framework to iterate their views on rate-setting in the wake of inflation. The updated policy allowed to shoot the inflation rate above its settled target of 2 percent. It thereby reduced the urgency for the central bank to raise interest rates.

However, Mr. Powell did not give any framework that could explain how his office would achieve higher average inflation, specifically after failing at it since 2013. The FOMC September meeting expects to reveal THE strategy.

Brewing Bitcoin Rally

The Federal Reserve’s balance sheet has ballooned by over $3 trillion in only three months. It eventually peaked at $7.17 trillion on June 10 but has since gone calm.

Fed balance sheet. Source: FRED

A rising balance sheet coincided with a supersonic price rally in the Bitcoin market. The cryptocurrency logged a 200-percent bull run. But after the Fed balance sheet plateaued over the last few weeks, Bitcoin reacted with a downside correction from its $12,500ish-top to below-$10,000 low.

Bitcoin is finding it hard to break above $12,000. Image Source: CoinStats

The cryptocurrency’s uptrend above $12,000 also stalled as traders anticipated that the Fed would fail to hit a 2 percent inflation target based on its track record in recent years. That said, the central bank’s meeting this week to discuss average inflation targeting raised hopes for Bitcoin bulls.

It is because of higher jobless claims and an unemployment rate of 8.4 percent. The Fed will have to intervene to achieve its “maximum employment and price stability goals” also as the US Congress fails to finalize the second stimulus package.

The Democrats want the Republicans to launch a $2.2 trillion aid to help the American households and individuals in the aftermath of the coronavirus-induced lockdown. Nevertheless, the Trump administration has clarified that it won’t go anywhere above $500 billion.

That leaves the Fed holding the stick for the US economy for an unforeseeable future. Therefore, the next FOMC meeting may have broader discussions about the next stimulus package. It would mean a more ballooned balance sheet.

Conclusion

To that end, Bitcoin looks poised to climb back towards $12,000. It is partially because of the underlying stress in the US dollar. Also, investors should pick riskier assets as safer investments like the long-term bond market remain unattractive due to near-zero lending rates.

Since you’re here, do check out the CoinStats cryptocurrency portfolio management app to manage all your crypto traders right from one place.

Photo by Frederick Warren on Unsplash

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Beware of What Comes after a Strong Bitcoin Rally

Bitcoin fell below $10,000 this weekend even as a majority of crypto warriors on Twitter were expecting a supersonic price boom towards $13,000, $14,000, $15,000, $20,000, and beyond.

That was obvious for most of us. Bitcoin had every ingredient to dish out a delicious bull run.

A central bank that committed to raise inflation rates beyond its normal targets. A plethora of analysts and strategists that suggested an extended period of lower interest rates. And a market that was looking to suck more US dollars as they came to life in the form of government-sponsored aids.

But despite every positive fundamental, Bitcoin slapped its $10,500-something top and rose atop bears to fall below $10,000 this Saturday. Traders sold the most bullish asset of this year. But why?

Bitcoin against US Economy Recovery

There are no exact reasons. But there are theories that surround the answer. One of them is the US economy itself. Last week, Uncle Sam released two data: one concerning the manufacturing, and the other, unemployment.

Both were like two-scoop ice cream for investors who wanted some sugary updates, after all. The ISM Manufacturing PMI surged from 54.2 to 56 in August, the highest reading since January 2019. Meanwhile, the labor market healed as the number of people collecting unemployment benefits decreased by 1.24 million to about 13.3 million for the week ended Aug. 22.

The news relaxed at least those who were planning to inject more liquidity into the US economy to help those who lost jobs and households. That suggested that there would now be lesser-than-expected US dollars in the market. In turn, there will be less money available to continue an otherwise pumped up Bitcoin, stock, and gold market.

The result was a stronger greenback. The US dollar index, which pits the dollar against a set of foreign currencies, rebounded 0.73 percent last week. Earlier before, the index had plunged to its 27-month low.

DXY’s rebound shakes risk-off and risk-on markets. Source: TradingView.com

At the same time, the US bond yields rose, suggesting that there were now better returns available in the bond market. Also, Treasuries were cheaper to buy.

All that happened because investors thought there is still a possibility of a full-fledged economic recovery, after all.

A Sandbox-Like Experiment

The last week’s Bitcoin plunge against an improving economic outlook in the US serves as a reminder that the cryptocurrency is allergic to good macroeconomic events.

It is like a sandbox experiment that shows how Bitcoin traders sell-off their holdings for near-term profits despite a long-term inflation outlook.

They tend to forget that the federal budget deficit may exceed $3.3tn by the end of this year. They also ignore that the US government debt could already outrun the size of its economy, with its debt-to-GDP expecting to go above 107 percent by 2023.

All that would require more stimulus measures from the top brass. It means the injection of more US dollars into the economy – an inflationary exercise, overall. But Bitcoin still falls below $10,000, perhaps because of a small bunch of weak but influential hands in search of short-term gains.

That nevertheless reminds of their inherent need to have cash first, Bitcoin later. Money is something that all of us need to purchase stuff, be it a safety-pin or an airplane. No matter how much the US dollar falls, it has utility.

Meanwhile, Bitcoin works as something that protects people from a depreciating US dollar. It is kind of a saving deposit that promises to hold your dollars for a longer timeframe and return better yields for doing it.

That makes Bitcoin a supply-and-demand game. Its price goes higher as long as there is money to enter its market via “whatever it takes” policies. But it also risks plunging harder than ever whenever demand shifts to cash.

The mainstream financial market is the best example to explain that. Countries like Japan, South Korea, and Taiwan in the 80s and Thailand, Malaysia, the Philippines, and Indonesia in the 90s experienced asset bubbles. But then it followed a long period of downsides.

As CoinStats also discussed earlier, China’s CSI 300 also pumped higher after the 2008 financial crisis after their central bank intervened with huge stimulus aids. But the rally fizzled in 2015. Today, the index sits a tenth below its all-time high.

It is because of the capital reallocations that are always happening around us. People sell one asset for another based on their personalized needs. One day, they may need Bitcoin. But on the other, they might want to sell the token for Yuan so they could buy a Beijing real estate with the money.

What is Bitcoin’s Worth Then?

Certainly, not a million dollars. But the cryptocurrency is worth more than where it trading presently.

In one aspect, the possibility of disappointing Bitcoin performance over the coming months cannot be dismissed, given how fast it has rallied since March 2020 – 161 percent, at the time of this writing.

Bitcoin slips towards $10,000. Source: CoinStats

Traders have pumped BTC/USD based on plenty of expectations. And the market needs more investors to ensure that the upside sustains. But given the underlying volatility risks, regulatory uncertainty, and fears of price manipulation, not all people have the stomach to ride the Bitcoin rollercoaster.

That shows in the Google Trends result for the keyword ‘Bitcoin.’ Not many people are looking for the cryptocurrency even amidst one of the scariest financial crisis. Gold is doing better there.

Gold-Bitcoin trend comparison over the last 90 days. Source: Google Trends

Meanwhile, in other aspects, Bitcoin needs more time to establish itself as a hedging rival to established assets like gold. But don’t let it fool you with million-dollar price prediction articles; even the precious metal, against the always weakening fiat currencies, had logged bear cycles.

Bitcoin is no less than any other asset if one takes out the “revolutionary” tag.

So beware if BTC/USD falls back to $6,000 on a stronger dollar sentiment, a working coronavirus vaccine, and a V-shaped economic recovery. But stick to it if you are in for a longer timeframe so to ensure that you beat inflation and fiat depreciation with one masterstroke.

Believe that Bitcoin’s appreciation has to with the dollar’s demand, not value. Even gold bulls had to wait nine years to reclaim their top levels.

Since you’re here, do check out the CoinStats cryptocurrency portfolio management app to manage all your crypto traders right from one place.

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The Top Three DeFi Tokens of 2020 So Far

The cryptocurrency market is experiencing a deja vu, thanks to DeFi, a backronym for decentralized finance.

The performance of every token listed under the said brand name is looking insanely bullish in 2020. It is very similar to how native tokens of a long string of initial coin offering (ICO) projects appeared in 2017. People saw potential in ICOs and bought their cryptos to realize that more than 90 percent of them were backing worthless vaporware projects.

But DeFi appears different. The industry has raised funds after delivering a working product, unlike the ICOs that were attracting billions of dollars worth of investment at the ideation stage. That serves as one reason why traders are still adamant about rising the crazy DeFi rally – they see real potential.

CoinStats has compiled a list of top decentralized finance tokens based on their market performance between January 1, 2020, until August 31, 2020.

#1 Aave

Aave is an open-source, non-custodial protocol that enables users to earn interest on deposits. The project also allows people to borrow assets based on a variable or stable interest rate.

It further enables people to obtain ultra-short duration flash loans without requiring collateral.

Aave had a different name at the time of its launch. As ETHLend, it was a product of the ICO craze but became one of the few projects that lived up to its promise to deliver a working product.

Its team raised $16.2 million via crowd sales to create a decentralized lending platform. Later, the protocol became part of Aave, a company that backed multiple crypto products, including Aave Lending, Aave Pocket, Aave Custody, Aave Clearing, and Aave gaming.

Aave’s native token LEND surged 4,115% in 2020. Source: CoinStats

Aave has now about $1.8 billion worth of cryptocurrencies locked inside its liquidity pool. That shows that the protocol can handle more requests for lending and borrowing.

Meanwhile, Aave’s governance token, LEND, has surged by almost 4,115 percent in value in 2020, its upside following a greater demand among traders to participate in proposing, voting, and deciding on new additions, features, assets on the Aave protocol.

The LEND/USD exchange rate was $0.749 at the time of this writing.

#2 Melon Protocol

Melon Protocol aims to reconstruct traditional investment vehicles by removing hurdles that add unnecessary costs to the operations. It enables asset managers to develop their own tokenized investment vehicles and define the key parameters, including fee structure, trading exchanges, risk management, compliance costs, etc.

Asset managers to get to write these rules into a self-executable computer code, known as smart contracts, while each outcome out of these contracts is stored on a blockchain. The process removes the need or writing contracts in a fund prospectus. It leads to cost, time, and operational savings.

Each process involved in the Melon Protocol relies on its native token MLN. Asset managers need to burn the cryptocurrency to set up a fund, seek investments from investors, approving an investment request by a third-party.

Melon Protocol’s MLN token’s performance in the last six months. Source: CoinStats

That means that each MLN holder receives compensation for holding the token against the rising number of funds’ creation. The Melon Protocol has assisted in creating 375 funds already, which has brought about $23,000 into the system.

Meanwhile, MLN/USD exchange rate has surged by 2,521 percent in 2020, becoming the second-most profitable token on a year-to-date timeframe. The pair was trading at $79.21 at the time of this writing.

#3 Ren

Ren backs a decentralized dark pool known as RenEx. The project is using its technology to create, deploy, and run privacy-centric applications using zkSNARK on its secure multiparty computation protocol (sMPC).

Meanwhile, Ren’s main product is RenVM, a decentralized custodian that brings interoperability to DeFi. It does so by holding users’ assets as they move between different blockchains using zero-knowledge proofs over an sMPC-based protocol.

The entire process remains hidden from everyone, including the Darknodes that power it.

The REN token, meanwhile, is used as a bond to run the Darknode. Each node operator deposits 100,000 REN to register and run the said obfuscation tool.

REN price up more than 750 percent YoY. Source: CoinStats

The REN/USD exchange rate has surged 1,475 percent so far in 2020.

Other Top DeFi Performers include…

…Airswap (1,005%), Loopring (890%), Kyber Network (876%), Bancor (666%), and others.

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Powell’s Jackson Hole Speech Will Leave Bitcoin More Bullish As Ever

Bitcoin price came in the middle of uncertainty this week as investors waited for Jerome Powell, the Federal Reserve chairman, to deliver his keynote address at this year’s Jackson Hole Symposium, an annual retreat that sees global central bankers breaking bread over high-profile economic table-talks.

Mr. Powell’s speech is set to become a benchmark of its own. The dovish dude will shed more light on how the Fed thinks about inflation. Meanwhile, he expects to clarify whether or not his office is willing to push the inflation target above their preferred annual limit of two percent.

Don’t Worry Be Dovish

Economists believe that Mr. Powell will push for higher inflation as an only remaining strategy to save the US economy from the further impact of the coronavirus-led financial crisis. It means that the chief would probably tell the markets, “don’t you dare worry about the money, honey! Daddy will print’em for y’all.”

At least that is what the Fed has done so far to create a false sense of security. Everyone remembers the March 2020’s global market rout, wherein every asset, be it Bitcoin, bonds, gold, or stocks, reported huge losses.

It happened because of the coronavirus pandemic and how it pushed the global economy into a lockdown-enabled limbo. But then came the Fed with its open-ended stimulus program and near-zero interest rates. As a result, more dollar-liquidity entered the market in six months than in the last six years.

Have a look at this M2 Money supply chart, for a change. Uncle Investopedia calls it “a measure of the money supply that includes cash, checking deposits, and easily convertible near money.”

M2 Money Supply is at $18.32 trillion. Source: FRED

What did the markets do with the new money? They rerouted them to riskier assets. As a result, stock market rallied despite lower corporate earnings, US bonds surged despite poor yields, and safe-haven assets like gold and Bitcoin logged record bull runs.

At the same time, the US dollar crashed to its 27-month low. In short, the savers expected losses as everything around them warned about getting more expensive. That is where the idea of higher inflation kicked-in among traders and investors.

Bitcoin is up by more than 200 percent since March 2020 on weaker dollar sentiments. Source: CoinStats

That Wealth Gap

Bitcoin bro Anthony Pompliano discussed the nature of inflation and how it impacts an average Joe–impeccably–in his latest newsletter. The Morgan Creek co-founder said that “interventionism economics” would create additional tax burden simply because the Fed is borrowing money from the future.

While the wealthy class may find a way out of it by reinvesting their depreciated dollars into real estates, gold, bitcoin, stocks, and whatnot, the middle and lower class will bear the consequences, eventually.

“The constant manipulation of the US economy through monetary policy is only weakening the efficacy of central bankers’ tools in the long run. This virus-related, government-induced economic slowdown is painful, but our inability to endure short-term pain for long-term gain is going to serve as a serious problem down the road.”

said Mr. Pompliano.

On Thursday, Mr. Powell may go ahead with the plans of breaking above their annual inflation targets. If not, the Fed chair might wait for the release of their FOMC minutes in mid-September to deliver the said future guidance.

Whenever the word comes out, the US dollar will have to bear further downside pressure. And it would lead to another bullish cycle in riskier assets. Of course, Bitcoin, with its inherent scarcity, will appeal to investors as an ideal hedging asset. It has already become a part of the reserves of MicroStrategy, Paul Tudor Jones, and Snappa.

Therefore, short-term uncertainty is just a mild crackle. The Fed would need to roll back its monetary aids and push interest rates higher if it wants to save the US dollar. But against the economic aftermath of the coronavirus, and US presidential elections ahead, it is less likely the central bank will cut-off its aid.

That explains why Mr. Powell’s speech could leave Bitcoin in an extremely bullish state down the road.

Just a Little Bitcoin Note

BTC/USD was up 58 percent on its year-to-date timeframe, according to data fetched by CoinStats.

Since you’re here, do check out the CoinStats cryptocurrency portfolio management app to manage all your crypto traders right from one place.

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What Warren Buffett Turning to Gold Means for Bitcoin

Warren Buffett is the same person who once loathed the idea of owning gold or Bitcoin. The legendary investor trashed the precious metal back in 2000 by calling it an unproductive asset. He had a similar opinion about Bitcoin, a presumed digital gold that he called a “rat poison squared.”

Buffett Turns Gold Bull

On August 14, news dropped that Mr. Buffett’s Berkshire Hathaway purchased 20.9 million shares in Barrick Gold, a Toronto-based gold mining firm, for about $563.6 million. Meanwhile, the conglomerate dumped its bank shares en masse, selling 26 percent, 60 percent, and 100 percent of its ownership in Wells Fargo, JP Morgan, and Goldman Sachs, respectively.

The decision made a bold statement about Berkshire Hathaway: It prioritized a gold-focused company over a bank when it came to allocating funds. That marked a swift U-turn for the firm, whose founders repeatedly criticized gold on multiple global platforms. In the process of rejecting the precious metal, they might have also kept many potential copycat investors from owning it.

But entering 2020, the dynamics have changed. It started with the coronavirus pandemic that forced a majority of global economies into a state of lockdown. Governments responded by imposing lockdown to contain the virus from spreading. The money flow slowed down as businesses shut doors. Unemployment rose.

Then, the governments intervened with trillions of dollars of stimulus programs. The fears of inflation surged. That led to an increase in the price of gold, a perceivable safe-haven asset. The same fundamentals also helped Bitcoin to rise higher.

Losses

As the gold rate surged, so did the stock value of the companies that mine them. Barrick Gold’s share price rose by more than 60 percent on the increase in bids for the precious metal. That appeared attractive to Berkshire Hathaway, whose portfolio plunged around 13 percent thanks to Mr. Buffett’s old-school approach of staying invested in banking and airline stocks.

Let’s see what those investments looked like as of August 10.

Apple $1.89T 54.4% 

Bank of America $236.5B -23.6% 

Coca-Cola (NYSE:KO) $206.4B -12.3% 

American Express (NYSE:AXP) $84.0B -17.3% 

Kraft Heinz (NASDAQ:KHC) $42.6B 10.8% 

Wells Fargo (NYSE:WFC) $105.3B -52.0% 

Moody’s (NYSE:MCO) $51.6B 14.7% 

JPMorgan (NYSE:JPM) $318.7B -25.9% 

U.S. Bancorp (NYSE:USB) $57.8B -35.4% 

Bank of New York Mellon (NYSE:BK) $33.9B -22.8%

Anthony Pompliano, the co-founder of Morgan Creek Digital, stated in his newsletter that Warren Buffett’s investment team had to dump their traditional beliefs after suffering the losses mentioned above. He wrote:

“I do not doubt that the investment team at Berkshire Hathaway has been discussing what they can do to mitigate the potential risk from high inflation in the coming years. If that conversation has been occurring, the natural conclusion in Wall Street’s conservative world is to gain exposure to gold.”

Bitcoin

That leaves Bitcoin in a similar bullish spell. The cryptocurrency’s gains this year surpasses even that logged by gold. In June, billionaire hedge fund investor Paul Tudor Jones allocated 1-3 percent of his $22.5 billion-portfolio to Bitcoin futures. And just this month, MicroStrategy, a public-traded firm, bought $250 million worth of Bitcoin for its reserves.

Both of them gave the same reason for their high-profile cryptocurrency exposure: inflation. Mr. Tudor Jones called Bitcoin the “fastest horse” in the global market. And MicroStrategy noted that the cryptocurrency could protect their reserves from a falling US dollar.

Bitcoin price performance over the last six months. Source: CoinStats

Mr. Buffett did not make such calls for Bitcoin. He vowed never to get involved with the cryptocurrency that has “zero intrinsic value.” But his firm’s latest inclination towards gold cleared at least one thing: Mr. Buffett is prone to change his basic strategies in the face of an unseen financial threat.

Why? Because Bitcoin is better than gold. The cryptocurrency is scarcer with a 21 million hard cap. It is easily movable across borders, unlike the heavy, precious metal. And it has better divisibility being a digital token.

There is a higher likelihood now that people would invest in scarcer assets. Bitcoin is a clear beneficiary should such a trend picks momentum.

Since you’re here, do check out the CoinStats cryptocurrency portfolio management app to manage all your crypto traders right from one place.

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